Oil industry chief warns Obama on Canada pipeline

By Matthew Daly

Associated Press

Published: Wednesday, Jan. 4 2012 3:31 p.m. MST

WASHINGTON — The oil industry's top lobbyist warned the Obama administration Wednesday to approve the Keystone XL oil pipeline or face "huge political consequences" in an election year.

Jack Gerard, president of the American Petroleum Institute, said it would be a "huge mistake" for President Barack Obama to reject the 1,700-mile, Canada-to-Texas pipeline. Obama faces a Feb. 21 deadline to decide whether the $7 billion pipeline is in the national interest.

"Clearly, the Keystone XL pipeline is in the national interest," Gerard said at the trade association's annual "State of American Energy" event. "A determination to decide anything less than that I believe will have huge political consequences."

Gerard said the oil group has teamed up with at least 15 unions to support the pipeline, which would create thousands of jobs.

"We will stand shoulder to shoulder" with labor unions that have backed the pipeline, including the Teamsters and the AFL-CIO's Building and Construction Trades Department, Gerard said.

"Over the next 60 days, they will not be silent," he said.

Gerard repeatedly referred to the Keystone pipeline at his annual speech assessing the energy industry, calling it the business group's top near-term priority.

While the pipeline has not been a focus of the GOP race for president, Gerard said the issue has the potential to become a major factor in the general election.

"It's already an election issue" in the presidential race and is likely to be a focus of several U.S. Senate races, Gerard said, calling the pipeline the largest "shovel-ready" project in the country.

The pipeline, proposed by Calgary-based TransCanada, would carry oil derived from tar sands in western Canada to refineries in Texas, passing through Montana, South Dakota, Nebraska, Kansas and Oklahoma.

TransCanada says the pipeline could create as many as 20,000 jobs over two years, a figure opponents say is inflated. A State Department report last summer said the pipeline would create up to 6,000 jobs during construction.

The pipeline proposal has forced the White House to make a politically risky choice between two key Democratic constituencies. Many unions back the project as a job creator in a down economy, while environmental groups fear it could lead to an oil spill disaster.

A payroll tax law signed by Obama just before Christmas includes a Republican-sponsored provision that sets a Feb. 21 deadline for Obama to decide on the pipeline. The administration is warning it would rather say no than rush a decision in an election year.

Environmental advocates, already disappointed with Obama's failure to achieve climate change legislation and his decision to delay new smog standards, have made it clear that approval of the pipeline would dampen their enthusiasm in his bid for re-election.

Some liberal donors even threatened to cut off funds to Obama's re-election campaign to protest the project, which opponents say would transport "dirty oil" that requires huge amounts of energy to extract.

If he rejects the pipeline, Obama risks losing support from organized labor, a key part of the Democratic base, for thwarting jobs.

Obama appeared to have skirted what some dubbed the "Keystone conundrum" in November when the State Department announced it was postponing a decision on the pipeline until after this year's election. Officials said they needed extra time to study routes that avoid an environmentally sensitive area of Nebraska that supplies water to eight states.

The affected area stretches just 65 miles through the Sandhills region of northern Nebraska, but the concerns were serious enough that the state's governor and senators opposed the project until the pipeline was moved.

Republican Gov. Dave Heineman, who opposed the initial route, says he supports efforts to accelerate the project, noting that provisions in the payroll tax bill allow the project developer to find a new route avoiding the Sandhills.

There was no immediate response from the White House.

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